Stocks slump as Russia downplays hopes of Biden-Putin summit

22 Feb, 2022

LONDON: European markets slumped Monday as the Kremlin downplayed prospects for a summit between US President Joe Biden and Russian counterpart Vladimir Putin to avert a possible Moscow invasion of Ukraine.

Russian stock markets tumbled by double digits as the Ukraine crisis appeared to escalate rapidly, with the Russian ruble also under pressure.

“Sentiment continues to be dominated by headlines concerning Ukraine, Russia and the West,” said ThinkMarkets analyst Fawad Razaqzada.

While the news of a possible summit brought relief to the markets, the Kremlin pouring cold water of the prospects of an immediate meeting unnerved investors.

“Putting to one side that we already knew there were no concrete plans on this even before the market opened, markets still reacted by immediately turning over in the aftermath of the announcement and sliding into negative territory,” noted Michael Hewson at CMC Markets UK.

Both the Frankfurt and Paris stock markets both fell by more than 2 percent after the announcement.

Tensions continued to mount as Russia claimed that one of its border posts had been shelled and that it had killed five Ukrainian “saboteurs” who had crossed into Russian territory, both of which Ukrainian officials denied.

Putin then said he is considering recognising the independence of east Ukraine’s two separatist republics, a move that would further complicate diplomatic efforts to resolve the crisis.

“It feels like the situation can dramatically escalate at any moment and that’s going to keep investors on edge for now,” said market analyst Craig Erlam at Oanda trading platform.

On the Moscow Stock Exchange, the dollar-denominated RTS index closed down 13.2 percent.

The ruble-denominated Moex index, which closes later, was down more than 10 percent.

Meanwhile, the Russian currency approached the 80 ruble to the US dollar threshold. When the ruble slumped though that level last month the Russian central bank intervened to prop up the currency.

Losses in London, at 0.1 percent, were limited by hopes for the UK economy as Prime Minister Boris Johnson announced a relaxation to pandemic legal curbs in England.

Trading on Wall Street is closed on Monday for a public holiday.

Warnings from US officials that Russia could invade its neighbour imminently sent markets spiralling last week and briefly sent crude surging towards $100 per barrel as traders fret over already tight supplies.

Oil prices rose on Monday, but remained well below $100 per barrel.

Observers are warning that oil at $100 per barrel could soon be breached and could hold above that level for an extended period, even if talks on Iran’s nuclear programme succeed and lead to the resumption of Tehran’s crude exports.

The sharp rise in crude is a key driver of inflation across the planet, adding to supply chain snarls and bottlenecks.

The Ukraine crisis has also compounded worries about decades-high inflation that is causing central banks to hike interest rates.

It also driving the prices of other commodities higher.

The price of nickel, a key component in stainless steel and electric car batteries, hit the highest level in more than a decade.

Russia is one of the world’s largest producers of nickel plus other key commodities such as oil, aluminium and palladium.

Nickel forged $24,610 per tonne in trading Monday — the highest level since 2011.

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